reciprocal immunity

reciprocal immunity

The tax immunity that interest payments on federal securities have against state and local authorities and that interest payments on state and local securities have against federal authorities. Although not specifically stated as such in the U.S. Constitution, reciprocal immunity has been recognized by the U.S. Supreme Court.

Similarly, under the current doctrine of reciprocal immunity, states and local governments may not impose taxes on the interest earned on federal bonds, or on other properties or sales on federal reservations or properties, any more than the federal government has been able to tax the interest on state and local governments.

The President's and House-passed version of the bill would set a precedent by altering the principle of reciprocal immunity and imposing a federal tax on the essential operations of state and local governments.

The House-passed version also contains provisions which would interfere with the traditional principle of reciprocal immunity by imposing the federal Btu energy tax on essential operations of municipal governments and permanently extend limitations on the deductibility of state and local taxes.

The House-passed version also contains provisions which wouyo interfere with the traditional principle of reciprocal immunity by imposiol the federal BTU energy tax on essential operations of municipal governments and preempt municipal condemnation authority.

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